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Macy's finds omnichannel success with RFID

Macy's is turning to RFID to support omnichannel initiatives, specifically its "Pick to the Last Unit" (P2LU) program. The retailer will use Tyco Retail Solutions' inventory visibility platform to access its full inventory throughout its entire store base.

Macy's is using stores to support online orders, particularly those for single items, essentially using the real estate as flexible warehouses.

RFID supports item-level identification, so Macy's can focus on product assortment and service while using existing inventory to address fulfillment demands. Changes to inventory management supporting this omnichannel strategy have allowed Macy's to reduce $1 billion of inventory from its stores.

Macy's P2LU program makes available the last unit of an item in any store, and RFID locates it. According to Tyco, retailers don't typically expose the last item of a SKU to online purchasing because they don't have enough confidence in their inventory accuracy or ability to find the item to make every unit available for customer orders.

"About 15 to 20 percent of inventory is accounted for by the last unit in the store," noted Peter Longo, president of logistics and operations at Macy's. "It's a massive amount of budget, either marked down or not sold, and it is curable through RFID."

Macy's (NYSE:M) initially conducted a P2LU test with women's dresses. Fulfillment sales at pilot stores were up significantly over the prior year and markdowns improved compared to non-pilot stores, according to the company. In addition to a sales lift on regular and first markdowns, inventory costs are being reduced by lowering interim inventory requirements by one-third.

"Macy's is a great example of how item-level RFID bolsters inventory optimization and opens up a world of possibilities for omnichannel fulfillment success," said Nancy Chisholm, president, Tyco Retail Solutions. "By utilizing our unique RFID Inventory Visibility offering, Macy's has a complete view of enterprisewide inventory to satisfy customer demand and achieve their 'buy anywhere, fulfill anywhere' vision. It not only allows them to enhance the overall customer experience, but also to maximize revenue opportunities from omnichannel programs."

RFID is emerging as the key to omnichannel success, letting retailers view inventory down to the item and location. Large chains such as Target are using RFID for fulfillment and in-store promotions, while brands like Levi's are using it to solve inventory visibility issues.